2/18/25 Live Trading Room Market Recap & Trades
SPX $6100 is the level to stay above for markets to break up and out of this slog-fest sideways. But that may be easier said than done as divergences are forming:
VIX looks subdued into VX expiry Wed, but has very large March VIX bets hitting past few days - likely on expected jobless claims triggering next Thursday & March NFP .
VX3M - VIX spread which is falling as SPX rises - which one is right?
US-JP rate differentials that favors bears as JGB 10Y spikes up to 1.43% - just waiting to trigger out of its large intraday wedge I’ve been highlighting for wks now.
USD-10Y spread which is supposed to fall as market rises - but it isn’t.
Markets rise despite MAG7 stocks weakening underneath - classic case of “spot up vix up” warning.
China Heating UP
Congrats to Geoffrey and his China-heavily-weighted portfolio. He’s now up +69% YEAR-TO-DATE.
Now, clients know how I said last year that I see “PARABOLA POTENTIAL” for Chinese ADRs ~March. Well, we are getting closer, helped by XI POLICY DIRECTIVES to advance a “techno-scientific innovation” agenda.
Michael Hartnett, BofA, is still bullish China (posted last week):
since Jan 20th, China big tech “BATX” (Baidu, Alibaba, Tencent, Xiaomi) up 22% vs. 0% for US Magnificent 7.
DeepSeek confirms that China is not losing the AI race; meanwhile there is big market catch-up potential (BATX market cap = $1tn vs $17tn for Mag7).
China outperformance can continue (Hang Seng China Enterprise Index up 34% from Sep'24 lows, and 20% in US$-terms) for these reasons:
(a) China policy is easing fiscal/monetary/regulatory to boost demand and lift abnormally low share of consumption in China GDP (39% vs 64% average for Mexico/Brazil/India) and
(b) DeepSeek shows China not losing ground in AI race, will produce cheap AI to support domestic economy, and challenges “US exceptionalism” consensus that AI race won solely by US big tech monopolies.
TRADE UPDATES:
NVDA - APRIL financed call spread from Feb 6th is now up 1800%. Time to reduce by at least half before digestion into earnings 2/26.